If you fall behind on your taxes and end up with a substantial burden of back taxes, you may find yourself receiving an IRS notice that states: “Your Account is in Jeopardy of Lien or Levy.” This might sound serious, and it is—but what does it mean, and what can you do about it?
Get answers with our overview of the ins and outs of IRS liens and levies, including which exceptional circumstances call for an IRS jeopardy levy and what your rights and options for resolution are.
When does the IRS issue a lien or levy?
Liens and levies are serious collection actions pursued by the IRS due to unpaid taxes. These methods of seizing assets are employed if the IRS believes standard collection methods may not be sufficient to satisfy an outstanding tax balance.
A lien is a legal claim against your property, including assets such as real estate, vehicles, or personal property, to satisfy the payment of your tax debt. The lien serves as a public notice that the government has a legal right to your property until the tax debt is resolved.
On the other hand, a levy is the seizure of your property and assets to satisfy an unpaid tax debt, including garnishing wages or taking money directly from your bank accounts. While similar to a lien, a levy is a more direct and immediate collection option.
What does it mean for your IRS account to be in jeopardy of lien or levy?
Before a lien or levy is placed on your IRS account and the IRS begins seizing property and assets, they will inform you through a notice of intent to levy. A notice of intent to levy will inform you that your IRS account is in jeopardy of lien or levy while providing you with a timeframe—typically 30 days—to either pay your outstanding tax balance, appeal the levy, or reach an agreement with the IRS to resolve your tax situation.
What makes a levy a “jeopardy levy?”
If the IRS has reason to believe that normal processes for using liens and levies to collect an outstanding tax burden are unlikely to succeed, they may issue a jeopardy levy. Unlike normal IRS levies, which have to go through the traditional collection due process hearing, an IRS jeopardy levy allows the IRS to immediately take action to collect a tax debt by seizing a taxpayer’s assets without prior notice or a court order.
Why does the IRS issue jeopardy levies?
An IRS jeopardy levy is a tool the IRS uses in especially urgent situations, such as when a taxpayer with outstanding tax debt is intentionally trying to make collections difficult or impossible through means such as concealing assets or moving them out of the country. It circumvents the normal due process for collection under the reasoning that a lengthier process will make it impossible for the IRS to satisfy unpaid back taxes.
The IRS may issue a jeopardy levy if a taxpayer is:
As you can see, the circumstances in which an IRS jeopardy levy can be issued are exceptional and extreme.
The Jeopardy Levy Process
When the IRS issues a jeopardy levy, your assets are automatically frozen prior to notification, and you are given a limited amount of time to respond to the levy—generally 30 days. If action is not taken to resolve your tax situation and prevent or mitigate the effects of the levy by then, the IRS may proceed with seizing your assets.
What are your jeopardy levy rights?
Taxpayers have substantial due process rights in the event of an IRS lien or levy, including the opportunity to petition the United States Tax Court.
As a taxpayer, under an IRS levy, you have a right to:
- A notice of levy informing you about the impending levy, the reason for it, and specific income sources or assets that may be subject to the levy
- An appeal to prevent or modify the levy
- Request a collection due process hearing to discuss your case with an independent appeals officer and explore alternatives
An appeal may involve agreeing to an installment plan, Offer in Compromise, or other method for paying back unpaid taxes.
While an IRS jeopardy levy is a more urgent option for exceptional circumstances, taxpayers do still have legal rights, namely the right to appeal a jeopardy levy and have the levy reviewed by an independent appeals officer. If you believe the IRS has made an error in issuing a levy, you may also have the option of filing a lawsuit in federal court to fight it.
Resolving IRS Jeopardy Levy Situations with Wiggam Law
According to the IRS manual, jeopardy levies are to be used sparingly and prudently for collecting tax debt in extreme circumstances. Like traditional levies and liens, IRS jeopardy levies can be appealed. Taxpayers have the opportunity to dispute whether the IRS’s ability to collect is truly in jeopardy, but it’s difficult to go up against the IRS alone.
If you’ve received notice that your IRS account is in jeopardy of lien or levy, or if your property and assets have been placed under jeopardy levy without prior notice, you need to act quickly. You have a limited window of opportunity to respond through an appeal, lawsuit, or negotiation before the IRS begins seizing your assets.
Wiggam Law is here to help you overcome the most challenging tax situations, including IRS jeopardy levy situations in which the IRS is taking urgent action to collect an outstanding tax debt. Our team of experienced tax attorneys combines extensive knowledge of tax law and experience with the complexities of tax resolution with personal attention and compassion for each and every one of our clients. Call us at (404) 233-9800 or schedule a consultation online.